New Metropoles

Doyle Saylor djsaylor at
Mon Nov 1 22:10:52 MST 1999

Greetings Comrades,
    I was reading Alan Abelson in Barrons magazine (page 5, Nov. 1, 1999
edition).  Abelson has a chart (called Awesome!) of the current stock market
levels of capitalization compared to 1929.  By any measure, this is the most
precipitous bourse bubble in world history. The current level of
capitalization is to quote one and one half the GDP of the U.S.  Of course
there are a lot of people like Jose who feel this is a new paradigm.  That
is the way of these sorts of economic miracles where people "feel" things
have changed, before the sudden transition comes along and down goes the
curtain on the first act.  I'm not saying Jose "feels" anything, he was
using stats to back his claims, but on a large scale lots of people have
stopped thinking this market could possibly go down.  It just can't happen.
Every 10% gyration that goes back up immediately just teaches everyone the
same lesson, it can't go down, the economy is way too strong.  It will grow
and grow until the end of time.  Sustainable growth based upon the use of
computers to enhance low inflation growth.  Just growing and growing, not
ever dying, not ever turning into the bad old days.  That is only for
Russians and others besides the good ole USA.

To quote,
Alan Abelson,
..."Not the least of them (possible troubling skeletons for investors to
contemplate) is that the beanstalk rises of the past couple of days might
just as easily be one of those devilishly deceptive bear-market rallies as
the start of something big.  Hard to tell, since both can begin with
eye-popping, perpendicular launches.

    "What's more, we think the notion, formulated above, of a reanimated
bull market soaring toward new peaks and, in the process, further energizing
a very energetic economy is a plausible one.  The Fed, for the moment, may
have decided to ignore the bubble, but if the bubble expands again in
earnest, the guys will have to ditch the jabber and actually do something.

    "And since the Street is now firmly convinced that there's no immediate
danger of decisive Fed action, the markets obviously are much more
vulnerable than they have been to a surprise hike, even a modest one.  Or,
for that matter, to a shocker of an employment report.


    "The bubble makes the Fed much more gingerly in its approach to any
perceived stirrings of inflation, much more reluctant to aggressively and
preemptively raise interest rates.  But the bubble also means that if, for
whatever reason, the Fed does move aggressively on rates, the effects could
be, in a word, ugly...."
Doyle Saylor

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